Yesterday, U.S. equity indices opened lower and were weaker through the morning, and sellers gained traction as headlines broke that Trump had rejected a potential deal with China ahead of a meeting in March. Although Larry Kudlow, Director of the National Economic Council for the Trump administration, countered the report, the damage had already been done with U.S indices down more than 2%.
The government shutdown also continues also to be a drag on the economy. The Washington Post reported that IRS officials will be permitted to remain home, which will result in slower tax refunds being issued. While the U.S. Senate will be voting today on ending the shutdown, the vote is likely to fail, continuing the stream of uncertainty.
The most noticeable earnings reports after the close yesterday was IBM. Today Procter & Gamble, Ford Motor Company and Kimberly Clark will headline the earnings calendar while the economic calendar is relatively quiet.
Overnight, 7 of 12 Asian markets closed modestly lower, and this morning, 8 of 13 European stock markets are trading lower, including all of the big three - DAX, FTSE, and CAC. The S&P 500 futures have rallied modestly while the gold and bond markets, which were rallying in Tuesday’s risk-off tone, have tempered their momentum.
Today’s S&P 500 futures chart shows daily candlesticks with the 9-day simple moving average in orange. We have noted how this moving average demonstrated resistance during the downtrend late last year, and now we notice that the same moving average is giving support to this market.
From Danny (DBOY) Riley:
Outlook from Danny Riley of MrTopStep: Looking for global economic growth to be slowing down and the multi-year lower trend in unemployment is soon to reverse, leading to job loss. I don't know how to explain it, but I have this rotten feeling in my gut that there is going to be another big shift in volatility. The S&P 500 Volatility Index (VIX) made a 30-day low at 17.17 last Friday, the lowest since December 3rd, and went up yesterday to 21.15, more than a 20% bounce.
I am a stock market bull, but to me, this looks like it could be a big setup that would run the markets higher and then let the headline algos do the dirty work, dropping them back down quickly. Yesterday was an example of this. The bottom line is that the markets were overbought. When you throw in the China trade dispute, Brexit, Italian fiscal troubles, and a fall in German industrial production, it all points to a synchronized global slowdown. Let's face it; the markets have bounced since Christmas, but the original problems that pushed the stock market down at the end of the year haven’t gotten better, nor have they gone away.
Today’s Economic Calendar:
- MBA Mortgage Applications 7:00 AM ET
- Redbook 8:55 AM ET
- FHFA House Price Index 9:00 AM ET
- Richmond Fed Manufacturing Index 10:00 AM ET